Net profit for the company slumped to 233 million rupees ($5.1 million), or 0.20 rupee a share, from 975 million rupees, or 0.83 rupee a share, in the previous quarter ended June 30.

Advertisement

Revenue came in at 12.42 billion rupees ($274.3 million), marginally down from 12.48 billion rupees in April-June.

Distinctly worried investors scrambled to exit the stock. At mid-day Tuesday, stock fell 8.4% to 77.30 rupees ($1.71) in a Mumbai market where the benchmark Sensex was down 0.5%.

This is the first time in two years that the Hyderabad-based company is reporting quarterly results. The firm plunged into turmoil in January 2009, when its founder and then chairman, B. Ramalinga Raju confessed to overstating the firm’s profits for years. Its accounts had to be re-evaluated after that, delaying further earnings reports.

The return to quarterly reporting for the company was supposed to pave the way for the firm to bid for many contracts that it hasn’t been eligible for since the fraud was disclosed but the numbers have analysts worried.

“Given the robust revenue growth at larger vendors during the second quarter of fiscal year 2011, a decline at Satyam increases our concern on revenue recovery,” IIFL Capital’s Sandeep Muthangi said.

In September, the company reported results for the previous fiscal year, which ended March 31. It posted a net loss of 1.25 billion rupees ($28 million) on revenue of 54.81 billion rupees and investors reacted then much the same way as they did Tuesday.

Larger rivals Tata Consultancy Services Ltd. and Infosys Technologies Ltd. posted strong July to September quarter results as business volumes continued to rise with the waning of the global economic slowdown. But Satyam, once India’s fourth largest software exporter by sales, has clearly failed to cash in on the spike in client technology spending. In the first half of this fiscal year the company managed to add just nine clients—a far cry from its peers. Tata Consultancy added 30 clients in the July to September quarter, while Infosys added 27.

“We believe that Satyam will have to overcome several operational challenges before it returns to industry growth and margins,” Dipen Shah of Kotak Securities said. The near-term performance of the company may remain subdued, he added.

The firm’s main challenges include continuing to restore credibility and acquire new clients. It’s also struggling with rising wage costs and attrition, say analysts.

The company, which now goes by Mahindra Satyam, on Monday described itself as stable but acknowledged that it needed to improve on all financial fronts. Software firm Tech Mahindra Ltd. took over Satyam following a government auction in April 2009, but the company is still listed on the Bombay Stock Exchange as Satyam Computer Services Ltd.

Still, the declaration of results is in itself good news, because one of the reasons Satyam hasn’t been able to get clients is because it hasn’t had audited financials.

“The disclosure of financials has lifted a ban on participation in many request for proposals,” said IIFL’s Mr. Muthangi.

About India Real Time

India Real Time offers analysis and insights into the broad range of developments in business, markets, the economy, politics, culture, sports, and entertainment that take place every single day in the world’s largest democracy. Regular posts from Wall Street Journal and Dow Jones Newswires reporters around the country provide a unique take on the main stories in the news, shed light on what else mattered and why, and give global readers a snapshot of what Indians have been talking about all week. You can contact the editors at indiarealtime(at)wsj(dot)com.